This article has been written by Ms. Shubhangi Kusum, a 4th year student of ICFAI University, Jharkhand.

 

Abstract

Corporate records and statutory register play a crucial role in the functioning of an organization. This article talks about the various aspects of maintenance of the databases related to the businesses and the businesses related transactions (here it means works related to keeping records and maintaining statutory register related things).

In the intricate world of corporate governance, meticulous record-keeping is akin to the foundation of a sturdy building. Just as a well, constructed foundation ensures stability, maintaining accurate corporate records and statutory registers is essentials for the smooth functioning of any organization.

This article explores the significance of statutory registers, their types, legal implication and the importance of timely updates, the key components of corporate records, understand their importance and highlight how well-kept record contribute to company’s stability and growth. From the register of deposits to the register of members, we delve into the critical role these records play in transparency, compliance, and efficient decision making.

Remember, just as climbers prepare meticulously before scaling Everest, companies must maintain their records with equal care to navigate the complex corporate landscape successfully.

Introduction

In the bustling corridors of corporate governance, meticulous record-keeping stands as the bedrock upon which organizations build their integrity. These records, often tucked away in files and databases, play a pivotal role in ensuring legal compliance, transparency and efficient management. 

The corporate records as well as the statutory registers are the main components of a successful business practices. They basically define the systematic arrangements and keeping records in the particular order so that there should be an ease of maintaining and enhancing the database of the businesses. These are the records which can also be considered as the “Essentials of the Business practices” as it can give direction to the business and it can also uplift the business in various ways. It can be influential as by maintaining it, one can easily help the businesses in the easement of the various works and duties.

Companies Act, 2013 requires certain Statutory register to be maintained. Penalties to the company as well as the officer involved may be imposed for the non-compliance of the requirement. This act also requires company to maintain and keep at its registered head office books of accounts and relevant documents and the financial statement for each financial year that furnish precise and true picture of the company’s state of affair, which comprise of its branch offices and other offices.

A description of transaction pretentious at registered and branch offices and such books must be kept on an accumulation basis and ensuing the double entry system of book keeping. Maintaining such records and registers are important for accomplishing statutory, disclosure and statistical.

What are Statutory Registers?

Statutory registers are official documents that companies are legally obligated to maintain under the Companies Act,2013. These registers serve as repositories of essential information related to the company’s structure, operation and adherence to the legal requirements. The register contains specific record of company’s shareholders, directors, deposits, loan and guarantee etc. and are placed at the registered office of the company.

Statutory records are different from the other ordinary accounting records that companies maintain. For the inspection by directors, members, creditors or by any other person some of the registered must be kept open. On payment of specified fees directors, members, creditors and other person may demand abstract from the registers of the company. 

As per the act various registers are required to be maintained but a company can only maintain those registers which are relevant to them as stated to the business and transaction. It is important for every company to provide these records, alongside specified fees in front of the Registrar of the companies (ROC) under a particular timeframe.

Types of Statutory Register under Companies Act,2013

There are almost 15 registers authorized under the Companies Act, 2013. Either the content of the register or the format of the register is specified by the law itself. Some registers may be applicable to all the companies while others will be applicable only when an event occurs.

1. Register under section 88-

1. Register of Members: Section 88(1) of the Act and Rule 3 of the Companies (Management & Administration) Rules, 2014 affirm that the format MGT-1 shall be followed for the maintenance of a register of members by every company. Register to be updated within 7 days following to allocation/ transfer of shares.
2. Register of debenture-holders: Section 88(2) of the Act and Rule 4 of the Companies (Management &Administration) Rules,2014 assert that the register of debenture-holder to be maintained under MGT-2 format. The format must be updated within 7 days of allocation/transfer of shares and within 15 days regarding any pledge, lien or incumbrance.
3. Foreign register: Section 88(4) of the Act and Rule 7 of the Companies (Management and Administration) Rules, 2014 may be maintained by Article of Association, if authorized and it has to be in same format as that of principal format. Form MGT-3 need to be filled before the registrar, within 30 days of opening of foreign register. If any foreign entry made in this register then it has to be updated within 15 days in India and its copy to be maintained in India as well. The maintenance of the foreign register can be discontinued by the company as it has option to do so and can transfer the entry to other foreign register or physical register.

1. 1. Register of Deposits: Section 73 & 76 and Rule 14 of the Companies (Acceptance of Deposits) Rule,2014 need to maintain the register of deposit providing the details of deposits, interest, tenure, etc. The register shall be maintained in superior order for a term not less than eight years from the financial year in which latest entry is made. Form DPT-1, DPT-3 to be filed to the registrar.
   2. Registers of Renewed & Duplicate share certificate: Section 46 the Act and Rule 6(3) of the Companies (Share Capital & Debentures) Rules, 2014 require the register to be maintained in the form SH-2. If it is proved to have been lost or destroyed or has been damaged, torn or mutilated and is submitted to the company then a duplicate share certificate will be issued.

• Register of Sweat Equity Shares: Section 54 of the Act and Rules 8(14) of the Companies (Share Capital & Debentures) Rules, 2014 require the register to be maintained in the form SH-3. The Sweat equity’s register should be maintained at the company’s registered office or any such other places as the Board or the director may decide. The data or the entries in the register shall be authenticated or it should be verified by the Secretary of the company or by another person authorized by the Board for the purpose.

• Register of Charges: Section 85 of the Act and Rule 10 of the Companies (Registration of Charges) Rules,2014 require the register to be maintained in the form CHG-7. The register of charges and instrument of charges shall be kept in every company registered office and the kept under registers shall be open for inspection without any payment of fees by any members during business hours. The instrument creating a charge or modification shall be eventually preserved up till 8 years from the date of satisfaction of charges.

Importance of Maintenance

1. Legal Compliance

• Legal mandate: The Companies Act,2013, explicitly requires companies to maintain these registers.
• Penalties for non-compliance: Failure to maintain proper records can result in fines ranging from 1 lakh to 10 lakh.

1. Transparency and Accountability

• Disclosure: Well-maintained records enhance transparency, allowing stakeholders to access relevant information.
• Auditing and Due-diligence: Accurate records facilitate external audits and due diligence processes.

1. Decision making and management

• Management Information System (MIS): Reliable data aids informed decision-making.
• Historical Context: Records provide insights into the company’s evolution and past decision.

1. Efficient Operations

• Organized Workflow: Properly maintained registers contribute to efficient administrative processes.
• Avoiding legal disputes: Accurate records minimize the risk of legal disputes arising from incomplete or incorrect information.

Consequences of not maintaining statutory register

Failure to maintain statutory registers can have serious repercussions for a company.

1. Penalties:

• Under section 88(5) of the Companies Act, 2013, if a company does not maintain registers of members, debenture-holders, or other security holders, it is liable to a penalty of 3,00,000 Rs.
• Officers of the company who are in default can also face penalties. Each director may be liable for a penalty of 50,000 Rs.

1. Legal implications:

• Non-compliance of with statutory register maintenance provisions can lead to legal proceedings against the company.
• Courts may view such non-compliance as a breach of corporate governance norms.

1. Impact on reputation and trust:

• Failing to maintain proper records can damage the company’s reputation.
• Shareholders, investors, and stakeholders may lose trust in the organization.

1. Operational challenges:

• Inadequate records hinder efficient decision-making and management.
• Audits and due-diligence become challenging without accurate register.

1. Imprisonment (in extreme cases):

• While fines are common, repeated non-compliance or deliberate diligence could lead to imprisonment to officers.

What are Corporate Records?

Corporate records encompass a variety of documents that provide a comprehensive view of the company’s history, operations, and legal standing. Some key components of corporate records include:

1. Articles of incorporations- These are foundational documents filed during the company’s formation. They outline essential details such as the company’s name, purpose, registered agent and initial shareholders.
2. Corporate bylaws: Bylaws specify how the company will operate, including rules for meetings, decision-making processes, and the roles of directors and officers.
3. Meeting-minutes: Detailed records of board meetings, shareholders meeting, and other official gatherings. They capture discussions, decisions and voting outcomes.
4. Financial ledgers: These track financial transactions, including income, expenses, assets and liabilities. Accurate ledgers are essentials for financial reporting and tax compliance.
5. Tax returns: Properly maintained tax records are critical for meeting legal requirements and managing tax obligation.
6. Shareholder information: Details about shareholders, including their name, addresses, share classes and ownership percentages.

Importance of keeping Corporate Records

1. Legal compliance: Corporations are legally obligated to maintain records. Failure to do so can result in penalties, legal disputes and even dissolution of the company.
2. Informed decision-making: Access to well organized records allows business owners and managers to make informed decisions. Whether its planning for expansion, assessing financial health, or evaluating performance, records provide valuable insights.
3. Business appraisal: Investors, creditors, and potential buyers rely on corporate records to assess a company’s values. Proper record keeping ensures transparency and build trust.
4. Resource management: Records help allocate resources effectively. Whether its tracking inventory, managing contracts, or monitoring cashflow, organized records streamline operations.
5. Long term viability: Maintaining records contributes to company’s stability and longevity. It ensures continuity even if key person changes.

The interplay of corporate records and statutory register

1. Overlap and integration

• Statutory registers are the subset of corporate records. They focus on specific legal requirements.
• Corporate records encompass a broader range, including operational and financial aspects.
• Companies integrate statutory registers into their overall record-keeping practices.

1. Mutual dependence

• Corporate records inform statutory registers. For example, meeting minutes contribute to the register of members.
• Statutory registers impact corporate decisions. Shareholder information influences voting rights and dividends.

Conclusion

Corporate records and statutory registers are intertwined. While corporate records provide a holistic view of a company’s journey, statutory registers ensure legal compliance and transparency. Businesses that prioritize both contribute to their own success and build trust with stakeholders. Corporate record keeping is not just a bureaucratic task; it’s a strategic necessity and provides with accurate and comprehensive records position themselves for growth, compliance, and success. Companies should allocate resources and attention to maintaining these registers diligently. By doing so, they uphold legal compliance, foster transparency, and build a robust organizational structure—one that stands tall, much like the mighty Mount Everest.

Remember: Accurate records today pave the way for a resilient tomorrow.

Reference

• This article was originally written by Aishwarya Agrawal and published on the website Lawbhoomi. The link for the same is in herein https://lawbhoomi.com/statutory-registers-under-the-companies-act-2013/
• This article was originally written by Mayashree Acharya and published on the website cleartax. The link for the same is herein https://cleartax.in/s/maintenance-statutory-registers
• This article was originally written by R. Balasubramanian and published on the website ICSI and the link for the same is herein https://www.icsi.edu/media/filer_public/1e/af/1eafa0f6-ebdb-4729-a96f-24032c5592c1/statutory_registers__companies_act_2013pdf_cs_balasubramanian R.pdf
• This article was originally written by Yahika Sood and published on the website complybook. The link for the same is herein https://www.complybook.com/blog/statutory-registers-under-the-companies-act
• This article is written by Eggspert and published on the website crayegg. The link for the same is herein https://www.crazyegg.com/blog/corporate-record-keeping/
• This article is written by Anonyms and published on the website zenbusiness. The link for the same is herein https://www.zenbusiness.com/corporate-record-keeping-definition/
• This article is written by Mohamed Gabir, Felicia Aloo and Elvis Kwame Ofori and published on the website journals.plos. the link for the is herein https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0264135